Work to craft proposals on updating Canada’s poverty line is nearing completion, with a final report on Statistics Canada’s proposals set for release next month.

The federal agency — which is tasked with updating the poverty line, known as the market basket measure (MBM) — released a series of reports in November and December detailing its initial proposals for how the measure should be tweaked.

Experts have also said revising the poverty line, which assesses five categories of costs for Canadian households in 50 regions in the provinces that reflect a “modest, basic standard of living,” could mean a bump in the poverty rate.

The MBM considers cost of food, clothing, shelter, transportation and other essential items, but the current baseline year for the measure is 2008, with methodological and inflationary tweaks made to it since then.

A household is considered in poverty if costs eat away too great a share of its disposable income.

Ottawa has committed to updating the MBM to adjust it to recent patterns of consumption and prices, with 2018 as its baseline year. The Liberal government says that since 2015, 900,000 Canadians have risen above the poverty line.

Proposed tweaks to housing, travel costs

A December report from Statistics Canada proposes updating rental prices using figures from the 2016 census, which would respond to Canadians’ comments in 2019 consultations that the current measure lowballs housing costs.

It also proposes that the new MBM’s reference family of four should have access to a three-bedroom household. The 2008-base MBM had considered a “2 or 3” bedroom unit as appropriate.

The report said preliminary estimates suggest shelter costs would increase for most regions for an updated measure.

The paper also proposes revising transportation costs by recognizing the use of private cars by low income earners compared to the current MBM, which bases travel costs on only public transit for certain urban areas. Longer usage rate and fuel efficiency of newer cars are also considered.

The report said revisions would increase travel costs in certain regions, while decreasing them in others.

Statistics Canada says once its report with final proposals is released, it will be followed by a review period during which Ottawa will work with experts, stakeholders and provincial and territorial officials to finalize the measure.

Agency spokesperson Maryse Carrière said no timetable has been set for the review and that decisions related to it are with Employment and Social Development Canada’s deputy minister and Canada’s chief statistician.

The report also calls for updating baskets for clothing and food items although estimated changes to costs are either minimal or yet to be determined. Changes to the other items basket are minimal, but the report said wireless costs should now be included.

A separate paper also proposes minor tweaks to how income is measured by excluding capital gains taxes and considering homeowners with a mortgage on closer footing to renters. Child-care costs are still included in income calculations.

Changes needed

Leila Sarangi, national coordinator of Campaign 2020, an anti-poverty coalition group, said shelter costs are “drastically underestimated” in the current MBM.

“Everybody knows that rent is skyrocketing. It has such a huge impact on families living on low income, so ensuring that gets updated regularly is going to be really crucial,” she said.

Its recommendations include increasing social transfers such as the Canada Child Benefit, boosting labour protections and addressing the lack of affordable housing.

The report, which reached the child poverty figure using what is known low income measure (LIM), also criticized the current MBM as highly subjective in its formulation and that it underestimated certain costs.

Sarangi said the MBM’s focus on material deprivation misses out on other impacts of poverty, such as on overall health and well being.

“People living in poverty are lagging behind in all these other kinds of measures,” she said, adding that, as it stands, the MBM can’t be applied to First Nations communities or the territories. Statistics Canada is set to create a formula for such communities, although a timeline has not yet been established.

The LIM, in contrast, is a relative measure that defines the poverty threshold as 50 per cent of median income dependent on size, and offers a view of how economic growth is distributed. Sarangi said the MBM should instead serve as a supplementary measurement to the LIM.

Bump in poverty rate likely after redraw

Sarangi and Carleton University professor Jennifer Robson both said the poverty rate will likely increase after the updated MBM comes into effect.

Robson said if the price of a basket of necessary goods and services has risen faster than annual adjustments to the MBM, then the dollar threshold of the poverty line will rise.

“All else being equal, this means more people will fall below that new higher line,” she said. “This could happen not just once, but periodically when the MBM is reviewed again, as it should be.”

She said adjustments could confuse data users going forward, but periodic tweaks make it a “more accurate way of measuring things.”

The last time the MBM was updated, in 2008, the poverty rate had climbed 2.2 per cent.

Carrière said the proposed 2018-base MBM will be made available by the agency for reference years 2015 to 2018 and that the current MBM will be still be accessible so users can compared the old and new measures.